Capital Gains Tax declaration is changing in April 2020 for property sales. If you buy a second property you will need to declare and pay your capital gains tax liability within 30 days.
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If you’re planning to sell a property that’s not your main home in 2020, there’s a new deadline you should be aware of.
Under the current system, property sellers are required to report and pay capital gains tax after the end of the tax year, through a self-assessment tax return.
But from 6 April 2020, the rules are changing so that a payment on account for any capital gains tax due must be made within 30 days of the completion of the sale.
Within the same period of time, the seller will also need to send a special payment on account return to HMRC, confirming the disposal and the amount payable.
Essentially, anyone who sells or gives away a home that’s not their main residence, and incurs a capital gains tax charge by doing so, could be affected by the new rules.
That includes landlords, second home owners, and people who have inherited property.
It doesn’t include people who sell their main residence, as this is usually covered by private residence relief.
At the moment, there’s a fairly long period of time between the time a property is sold and the deadline for paying any capital gains tax that arises.
Sellers have from the end of the tax year to the self-assessment deadline on 31 January to calculate, report and pay their capital gains tax liability.
The Government has said it thinks it is right that the taxis collected sooner, and that doing so will “reduce error and increase compliance”.
A couple of other changes to capital gains tax are expected to take effect in the 2020/21 tax year, mainly affecting landlords and second-home owners. Here’s what we know so far:
We can help you prepare for the change and ensure the Capital Gains Tax is applied in the right way. Contact us or find out more about our services for individuals and landlords.
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The scheme sets out rules for how payments to subcontractors for construction work must be handled by contractors in the industry, taking into account the subcontractor’s tax status
The scheme covers all construction work carried out in the UK, including tasks such as site preparation, alterations,dismantling, building, repairs, decorating and demolition.
It does not usually cover tradespeople who only do specific jobs,such as architects, surveyors, carpet fitters, manufacturers of construction materials, and those who deliver such materials.
However, an exception exists where a professional goes beyond their discipline to act as the developer or main contractor on top of providing their services.While it does not apply to construction work taking place outside the UK, a business based outside the UK and carrying out construction work within it must register under the scheme.
The scheme covers all types of businesses within the construction industry, including companies, partnerships and sole traders. These businesses can be contractors,subcontractors or both.
The terms ‘contractor’ and ‘subcontractor’ have specific meanings under the construction industry scheme, which are much broader than is generally referred to within the industry
All contractors and subcontractors should register with HMRC for the construction industry scheme. Subcontractors will be subject to a higher-rate deduction if they have not registered.Contractors deduct money from a subcontractor’s payments and pass it to HMRC.
These deductions count as advance payments towards income tax and national insurance, similar to PAYE. A limited company will have deductions taken by the contractor from the income due to the company.This deduction can then be offset against other company tax liabilities such as PAYE, VAT, corporation tax or can be refunded to the company after the end of the tax year.Sole traders and partnerships will also have deductions made from the income they receive.
They are then required to report their gross income on their self-assessment tax returns, with contractor deductions also reported on the tax return and subsequently deducted from any income tax liability which is calculated as being due.
Contractors need to verify a subcontractor’s status with HMRC before payment is made to establish whether they are registered and the correct amount of tax to withhold. Tax can be deducted at source at 0%, 20% or 30%.
Contractors must report all of the payments they have made under the scheme to the Revenue, or report they have made no payments in the tax month, by the 19th of each month.Penalties apply if the monthly return deadline is missed.
If your looking to read more about Making Tax Digital and how it affects you then please download our free guide,
Upcoming changes for reverse VAT charge in the Construction Industry Scheme
HMRC has advised those affected by the change to take the following steps by 1 October 2019:
The other preparations you’ll need to make will depend on whether you’re a contractor, a subcontractor, or a business receiving specified services.
If you’re a subcontractor, you can prepare by contacting your customers to confirm whether the reverse charge will apply. You should also find out whether they are an end user or intermediary supplier.
“Company A is building a new warehouse. They hire to Company B to provide the design andbuilding work for the warehouse. Company B subcontract the building of thewarehouse out to Company C for materials and Company D for the construction whoin turn subcontract out equipment hire to Company D and hire subcontractorworkers for the build………Who charges for the VAT?”
Contractors should review all their contracts with subcontractors, decide if the reverse charge will apply, and notify their suppliers if it will.
HMRC has advised those affected by the change to take the following steps by 1 October 2019:
The other preparations you’ll need to make will depend on whether you’re a contractor, a subcontractor, or a business receiving specified services.
“Company A is building a new warehouse. They hire to Company B to provide the design andbuilding work for the warehouse. Company B subcontract the building of thewarehouse out to Company C for materials and Company D for the construction whoin turn subcontract out equipment hire to Company D and hire subcontractorworkers for the build………Who charges for the VAT?”
If your business receives building or construction services that are reported under the CIS but does not supply them, it will be considered an ‘end user’ under the scheme. This means the reverse charge will not apply, and your supplier will need to charge VAT in the normal way.You should provide confirmation of your end-user status to your supplier, to make them aware that the reverse charge does not apply.
HMRC has advised those affected by the change to take the following steps by 1 October 2019:
The other preparations you’ll need to make will depend on whether you’re a contractor, a subcontractor, or a business receiving specified services.
“Company A is building a new warehouse. They hire to Company B to provide the design andbuilding work for the warehouse. Company B subcontract the building of thewarehouse out to Company C for materials and Company D for the construction whoin turn subcontract out equipment hire to Company D and hire subcontractorworkers for the build………Who charges for the VAT?”
HMRC has advised those affected by the change to take the following steps by 1 October 2019:
The other preparations you’ll need to make will depend on whether you’re a contractor, a subcontractor, or a business receiving specified services.
If you’re a subcontractor, you can prepare by contacting your customers to confirm whether the reverse charge will apply. You should also find out whether they are an end user or intermediary supplier.
Contractors should review all their contracts with subcontractors, decide if the reverse charge will apply, and notify their suppliers if it will.
If your business receives building or construction services that are reported under the CIS but does not supply them, it will be considered an ‘end user’ under the scheme. This means the reverse charge will not apply, and your supplier will need to charge VAT in the normal way.You should provide confirmation of your end-user status to your supplier, to make them aware that the reverse charge does not apply.
MTD for VAT is compulsory for VAT-registered businesses with turnover above the current VAT-registration threshold of £85,000, which has been frozen until 1 April 2020.
From the start of their first VAT return period or after 1 April 2019, VAT-registered businesses with turnover above the VAT registration threshold will need to comply with the digital record-keeping and reporting requirements of MTD for VAT.
VAT-registered businesses whose turnover is below the VAT registration threshold will be able to choose whether to join MTD for VAT.
Once within the scheme, a business must remain in it while they are VAT-registered,even if their turnover falls below the VAT-registration threshold.
We can help you make your Let Property Campaign disclosure easy and hassle free whilst ensuring you only pay the right amount of tax. We give a full tax review on all of the years you did not declare, helping identify allowable expenses or reliefs that could help minimise your tax liability.
It’s compulsory for you to keep a digital record of your business’ name and an address, which is the principal place of business. Your business’ VAT-registration number and a record of any accounting schemes used must also be recorded digitally.
For each supply your business receives, you need to record the time of supply, the value of supply (including any VAT that cannot be reclaimed), and the amount of input tax to be claimed.If there is more than one supply on an invoice, the totals from the invoice can be recorded.
For each supply made by your business, you must record the time it was supplied, how much it was worth at the time and the rate of VAT charged. Multiple supplies made at the same time don’t need to be recorded separately. The total value of supplies on each invoice or receipt that have the same time of supply and rate of VAT can be recorded. A record must also be kept of output values for the period split betweens tandard rate, reduced rate, zero rate, exempt and outside the scope outputs.
The VAT account provides the link between the digital VAT records and the VAT return submitted to the Revenue.
Under MTD for VAT, the information which must be held in the VAT account must be maintained digitally and this is referred to as the ‘electronic account’.
To demonstrate a link between the output tax in the business records and the output tax on the VAT return, the electronic account must contain a record of:
Similarly, to demonstrate the link between the input tax in the businessr ecords and the input tax on the VAT return, the electronic account must contain a record of:
Where adjustments are required, only the total value for each type of adjustment will need to be kept digitally.
However, while the underlying calculations don’t have to be made digitally or using software, and can be performed manually or by using spreadsheets if preferred, using software should reduce the risk of errors. The electronic account is vital as the information held in it will be used to calculate and complete the VAT return using functional compatible software
‘Functional compatible software’ is the cornerstone of MTD for VAT. It will be used to maintain the compulsory digital records, calculate the return and submit it to HMRC via an application programme interface (API). Functional compatible software is simply the name given to a software program, or set of compatible software programs, which are capable of:
It’s possible to mix and match software – the complete set of digital records needed for MTD for VAT don’t need to be held in one piece of software.
As long as there is a link between the different pieces of software, the records can be held in a range of acceptable digital formats.
The link between the software is key, and is a legal requirement where a set of compatible software programs is used.
HMRC is likely to produce a list of software from commercial software suppliers which can be used for MTD for VAT.
We encourage as much contact with our clients as possible as the more we learn , the more we are able to assist you in developing and growing your business.
We offer unlimited Free accounting, business, tax, marketing and web advice to all of our customers. To see how we can help, visit our client advice page.
All of our fees are quoted for and agreed in advance. This makes it easy for you to budget and protect your cashflow with our monthly payment terms.
We offer Free business review meetings to our clients all year. We can help you to analyse your business and make achievable targets to improve.
The VAT return is calculated from the digital records maintained in the functional compatible software, and a business will need to confirm the return is correct before sending it to HMRC.
Once submitted, confirmation the return has been received by HMRC will be received via the software, while VAT returns can be submitted by us on behalf of your business.
If you have properties to declare then get in touch and we will talk it over with you so we can provide you with a fixed fee, no obligation quote.
Our UK qualified accountants have over 20 years experience with tax and dealing with HMRC.
We have been handling clients let property campaign since the campaign started in 2013.
We can handle the entire process, taking the stress away by dealing with HMRC for you.
Our pricing is simple, fixed and agreed in advance, allowing you to plan for all your costs.
We will conduct a full tax review to make sure you are claiming everything your entitled to.
We can work with you online/over the phone from anywhere in the UK.
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Xero is online accounting software that helps you to save time on your paperwork and get paid faster.
Xero is online accounting software that helps you to save time on your paperwork and get paid faster.
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Xero is online accounting software that helps you to save time on your paperwork and get paid faster.
Xero is online accounting software that helps you to save time on your paperwork and get paid faster.
Xero is online accounting software that helps you to save time on your paperwork and get paid faster.
Xero is online accounting software that helps you to save time on your paperwork and get paid faster.
MTD for VAT is compulsory for VAT-registered businesses with turnover above the current VAT-registration threshold of £85,000, which has been frozen until 1 April 2020.
From the start of their first VAT return period or after 1 April 2019, VAT-registered businesses with turnover above the VAT registration threshold will need to comply with the digital record-keeping and reporting requirements of MTD for VAT.
VAT-registered businesses whose turnover is below the VAT registration threshold will be able to choose whether to join MTD for VAT. Once within the scheme, a business must remain in it while they are VAT-registered, even if their turnover falls below the VAT-registration threshold.
Where turnover is above the VAT-registration threshold on 1 April 2019, the start date will depend on how the VAT quarters fall:
There are very few exemptions for MTD for VAT. You maybe granted exemption if your business is a Religious Society, it is undergoing insolvency procedures or that you find it is not reasonably practical to use digital tools to keep business records based on reasons for age, disability or remoteness of location.
If any of these exemptions apply to your business or that you are unsure, HMRC advise you to contact the VAT Helpline on 0300 200 3700.
Certain records must be kept digitally within functional compatible software under MTD, and be preserved for up to six years.
It’s compulsory for you to keep a digital record of your business’ name and an address, which is the principal place of business. Your business’ VAT-registration number and a record of any accounting schemes used must also be recorded digitally.
For each supply your business receives, you need to record the time of supply, the value of supply (including any VAT that cannot be reclaimed), and the amount of input tax to be claimed.If there is more than one supply on an invoice, the totals from the invoice can be recorded.
For each supply made by your business, you must record the time it was supplied, how much it was worth at the time and the rate of VAT charged. Multiple supplies made at the same time don’t need to be recorded separately.
The total value of supplies on each invoice or receipt that have the same time of supply and rate of VAT can be recorded. A record must also be kept of output values for the period split between standard rate, reduced rate, zero rate, exempt and outside the scope outputs.
There are a range of different ‘Functional compatible software’ available including Online Book-keeping Software, Excel Bridge Software, Online VAT Submission Software and Accountant specific Software.
They must be capable of recording and preserving records in an electronic form, providing information and returns from the records to HMRC in an electronic form using the API platform and receiving information from HMRC
It’s possible to mix and match software – the complete set of digital records needed for MTD for VAT don’t need to be held in one piece of software.
As long as there is a link between the different pieces of software, the records can be held in a range of acceptable digital formats.
The VAT account provides the link between the digital VAT records and the VAT return submitted to the Revenue.
Under MTD for VAT, the information which must be held in the VAT account must be maintained digitally and this is referred to as the ‘electronic account’.
To demonstrate a link between the output tax in the business records and the output tax on the VAT return, the electronic account must contain a record of:
Similarly, to demonstrate the link between the input tax in the business records and the input tax on the VAT return, the electronic account must contain a record of:
Where adjustments are required, only the total value for each type of adjustment will need to be kept digitally.
However, while the underlying calculations don’t have to be made digitally or using software, and can be performed manually or by using spreadsheets if preferred, using software should reduce the risk of errors. The electronic account is vital as the information held in it will be used to calculate and complete the VAT return using functional compatible software
The VAT return is calculated from the digital records maintained in the functional compatible software, and a business will need to confirm the return is correct before sending it to HMRC.
Once submitted, confirmation the return has been received by HMRC will be received via the software, while VAT returns can be submitted by us on behalf of your business.
The countdown has begun and VAT-registered businesses need to start getting ready. It’s important to understand what’s required and what records must beheld digitally. It’s also important to decide what software will suit the business, and whether a single piece of software or a set of software will be best for you.
Once you have decided, you should make checks to ensure everything is up and running by the relevant start date. HMRC has promised a soft landing – but, as always, it pays to be prepared.
